At a Glance
- CSR is often associated with philanthropy, including activities such as charitable donations or employees volunteering for community initiatives, but this is an outdated interpretation that underestimates the benefits CSR can bring to a company and its stakeholders.
- There are similarities between CSR and ESG. However, the key word in CSR is ‘responsibility’.
- The broad objective of ESG is to improve a company’s sustainability performance and risk management, and it includes CSR as a part of its assessment.
The concept of Corporate Social Responsibility (CSR) has been around for many years, long before Environmental, Social, and Governance (ESG).
In recent years, however, the focus on CSR has faded somewhat as companies have turned their attention to ESG to meet the needs of investors. But while there is considerable overlap between the two, it is important to note that CSR is actually a component of ESG.
Unpacking CSR
Over the years, CSR has become strongly associated with philanthropy, and as a result, the view that it is something that companies do purely to enhance their brand image has gained a lot of traction. The fact that responsibility for CSR has often been given to the marketing and communications department has only contributed to this perception.
Making charitable donations, having employees volunteer for community initiatives, sponsoring community events, launching awareness campaigns for good causes, and offering internships, are activities that have become associated with CSR.
However, this is an outdated interpretation of the concept and underestimates the benefits that a strategic approach to CSR can bring to both the company and its stakeholders.
While there is no universal definition of CSR, research shows that it has five core dimensions.
- Environmental Dimension: How business activities affect the environment and what measures are taken to manage this.
- Social Dimension: How a company affects society and local communities, and how it interacts with these groups to foster better relationships.
- Economic Dimension: How a company can generate positive economic impacts through its activities.
- Stakeholder Dimension: How a company interacts with different stakeholders, including employees, customers, suppliers and the local community, to create mutual benefits.
- Voluntary Dimension: How a business goes beyond its legal and regulatory obligations to do good and embeds ethical values in its operations.
There are a number of comprehensive CSR frameworks that further dispel the myth that CSR is all about charity. ISO 26000, for example, provides guidance for all organisations – not just businesses – that recognise that respect for society and the environment can be a critical factor in business success.
It was developed through a multi-stakeholder approach and is aligned with key international standards and norms including the UN Global Compact, the UN Declaration of Human Rights, the International Labour Organization (ILO), the Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI), the OECD Guidelines, and the UN Working Group on Business and Human Rights.
It defines social responsibility as an organisation’s responsibility for the impact of its decisions and activities on society and the environment through transparent and ethical behaviour that:
- Contributes to sustainable development, including the health and well-being of society
- Responds to stakeholder expectations
- Complies with applicable laws and international standards of conduct
- Integrated throughout the organisation and practised in its relationships.
Does CSR still matter in the ESG era?
Does CSR still matter in the ESG era?
Ready for a change in your organisation?
Differences between CSR and ESG
Those familiar with ESG frameworks will recognise similarities between the two concepts. However, the key word in CSR is ‘responsibility’.
ESG focuses on managing ESG risks and opportunities as they relate to a company’s core business, with the broad aim of improving a company’s sustainability performance and risk management. ESG assesses a company’s ability to create long-term value for stakeholders and its resilience. It is broader in scope and includes CSR as a component of its assessment.
Organisations do not operate in a vacuum, but within an ecosystem of different stakeholders, and business success depends on the overall health of this ecosystem. In addition, organisations are under greater stakeholder scrutiny than ever before, and their perceptions of an organisation’s behaviour can affect its overall performance.
Therefore, by acting responsibly and investing in activities that don’t necessarily generate an immediate measurable return, companies can ultimately reap a variety of long-term benefits, including:
- Gain competitive advantage
- Enhancing reputation
- Attracting and retaining employees and customers
- Attracting investors, donors, and sponsors
- Improving relationships with other stakeholders including government, media, suppliers, and local communities
Expert guidance to facilitate your transformation
RenoirESG can help clients develop a comprehensive CSR strategy, starting with a social materiality assessment to identify their key social, environmental, and economic impacts.
We can ensure that the CSR strategy is aligned with and complements their ESG strategy, as well as key international standards such as the UN Global Compact, the SDGs, and the UN Working Group on Business and Human Rights.
We can design processes that support efficient implementation of the CSR strategy and deliver better results. Finally, we can help monitor and measure the impact of CSR initiatives to improve the overall strategy.
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